With the rising cost of living, many people are now looking at gig work and freelancing to maintain their standard of living or improve their financial circumstances. In fact, according to an Upwork research study, 64 million Americans freelance as a side hustle or full time enterprise. Unfortunately, the support system is struggling to move with the times and support these enterprising workers. However, this doesn’t mean that you need to go it alone if you need some extra help. While most benefits are still reserved for conventional workers, there are some government benefits that you may be eligible for.
Understanding Role Classifications
One of the main areas of contention in terms of worker benefits is how they are classified. In the past, workers were simply temporary or permanent, full or part time, but the advent of the gig economy has made the landscape a little more complicated. Unfortunately, this makes it a little trickier to determine qualifications and eligibility for benefits and employment protections.
| Aspect | Freelancers | Independent Contractors | Gig Workers |
|---|---|---|---|
| Definition | Self-employed individuals offering services/project work, often to multiple clients | Individuals contracted to perform specific tasks or projects, not on payroll | Workers using platforms (like Uber, DoorDash) for short-term tasks |
| Common Examples | Writers, designers, developers | Consultants, plumbers, IT specialists | Rideshare drivers, delivery workers, taskers |
| Work Platform | Direct client contracts or freelance platforms (e.g., Upwork) | Usually work via contracts with businesses | App-based platforms (e.g., Uber, Instacart, Fiverr) |
| Control Over Work | High — chooses clients, rates, schedule | Moderate — project-based, but more autonomy than employees | Low to moderate — platform often sets prices, terms |
| Tax Status | Self-employed; must file Schedule C | Self-employed; issues 1099-NEC | Self-employed; often receives 1099-K or 1099-NEC |
| Eligible for Benefits? | Possibly, if they pay self-employment taxes and meet criteria | Same as freelancers | Varies — may be eligible for limited benefits if classified as self-employed |
| Access to Protections | Limited (no unemployment, workers’ comp unless state-mandated) | Same — protections vary by location and job type | Very limited; depends on local/state laws and platform policies |
| Legal Classification | Usually self-employed | Self-employed, distinct from employees | Often a gray area — subject to legal disputes |
| Tools & Equipment | Typically use their own | Use own tools, responsible for own costs | Often must use their own car, phone, etc. |
Freelancers
Freelancers are self employed individuals that typically provide specialized services to their clients on a per project or contract basis, rather than working as a full or part time employee. This flexibility allows freelancers to work with multiple clients simultaneously in fields such as writing, graphic design, web design, software development, marketing, consulting and coaching. The freelancer can set their own hours, but they are essentially operating their own business, meaning that they are responsible for their own business operations including client communications, invoicing, marketing and taxes.
This independence does come at a cost, as earnings can vary significantly from month to month according to the size and number of contracts, which means that freelancers do need to carefully plan their finances and retirement planning.
Independent Contractors
Although the term “independent contractor” is often used interchangeably for “freelancer,” the two differ in how they operate. Technically, an independent contractor is a type of freelancer, but they typically work on larger projects, may work on-site or accept clients via an agency.
Since independent contractors may work on an entire multi faceted project rather than focusing on a single deliverable, they often have less flexibility in their schedule and work terms. The work is usually completed on a temporary basis, but the timeframe may be extendable or flexible according to the employer’s needs. They may also work on a schedule which looks similar to a traditional employee, agreeing to work specific hours on an hourly or per project rate of pay.
Gig Workers
A gig worker is typically a task based, short term worker, with each task coordinated through an app or online platform. Unlike freelancers, these tasks typically don’t require specialized training or skills, and may involve on demand or physical services. Some common examples include rideshare drivers, delivery drivers, or task based service providers such as with platforms like TaskRabbit or Handy.
The gig work is often sourced and scheduled by a digital platform, allowing jobs to be accepted in real time. This does encourage quick completion and some degree of flexibility, since the gig worker can choose when they are available to accept work and when they are not. But, typically, they have little control over client selection or pricing. Many gig worker platforms don’t offer traditional employment benefits, so workers need to manage their own expenses and taxation.
The Benefits of Gig Working/ Freelancing
Freedom and Flexibility
The most obvious benefit of gig work or freelancing is that you are an independent worker with the ability to set your own schedule, decide which platform or client you want to work with and set your own pace. This autonomy is appealing to those who want to slot the work around other commitments, like to travel or are looking to achieve the ideal work life balance.
Control Over Work Variety and Content
Another benefit is that freelancers and gig workers can select tasks or projects that appeal to them or align with interest, skills or career goals. For creatives, you can work on a wide variety of engaging assignments, rather than being stuck performing repetitive tasks under more rigid job conditions.
Potential for Multiple Income Streams
Gig working and freelancing also provides an opportunity to develop multiple income streams. Instead of depending on just one employer, these independent workers can contract with multiple clients or use different work platforms, creating a layer of financial security in times of economic uncertainty.
Lifestyle/Geographic Freedom
In many situations, freelancers have geographic freedom, since much of the work can be performed remotely. This creates the flexibility to lower the cost of living by traveling or relocating, and greater job satisfaction. When working remotely, there is no commute or need to deal with office politics, since the freelancer can work independently in their preferred workspace.
Sense of Entrepreneurship
A unique advantage of both freelancing and gig work is that you can develop a sense of entrepreneurship. Essentially, freelancers and gig workers are operating their own business, and in the case of freelancers, they can negotiate contracts, set rates and build a personal brand, directly influencing their future earning potential.
The Drawbacks of Gig Working/ Freelancing
Unfortunately, there are some potential drawbacks that need to be considered before engaging in freelance or gig work.
Lack of Employer Benefits
One of the main disadvantages of being a freelancer or gig worker is that you’ll lack employer provided benefits such as paid time off, parental leave, retirement contributions and health insurance. Gig workers and freelancers need to fund these benefits for themselves, which can be both complex and costly.
Unpredictability of Earnings
Another significant drawback is income unpredictability. Unlike being a salaried employee, receiving a consistent paycheck, as a freelancer or gig worker, your income may fluctuate from month to month. The work may be project based, seasonal or significantly impacted by economic cycles. Having financial instability makes it difficult to budget, and qualify for borrowing products, such as loans or mortgages.
Lack of Job Security
While there are no guarantees in any role, freelancers and gig workers typically work on short term contracts or on a per task basis, with no guarantees of ongoing work.This means that assignments can suddenly end with little or no notice, and no severance pay.
Tax Obligations
As we touched on, self employed individuals need to handle their own tax obligations including paying the full share of Social Security and taxes. This means that they need to track their income and expenses throughout the year, estimate quarterly tax payments and file more complex tax returns.
Admin Tasks
Many freelancers are also obliged to perform a number of administrative tasks that can be time consuming and a distraction from paid work. While invoicing, managing contracts, customer liaison and marketing can be interesting, it can become a chore.
Lack of Legal Protections
Independent contractors may not have the protections of occupational safety standards, anti discrimination rules and minimum wage requirements. This means that seeking redress for unfair treatment can be complex and difficult.
Healthcare Government Benefits for Freelancers and Gig Workers
As freelancers or gig workers, it is still possible to access a number of healthcare government benefits.
ACA Health Insurance Marketplace
The Affordable Care Act allows individuals to purchase health insurance through the marketplace. The benefit of ACA is that you may qualify for subsidies due to your income, which could significantly reduce your monthly premiums.
Medicaid
If your freelancer or gig worker income is below the threshold for your state requirements, you may qualify for Medicaid. This provides low cost or free basic medical care that is funded by both the state and federal government.
Remember that the income thresholds are calculated as an annual amount. So, if your income fluctuates and you have some months where you earn more, but some months where you earn far less, it won’t compromise your qualification.
COBRA
COBRA or the Consolidated Omnibus Budget Reconciliation Act is a federal law, which allows you to retain employer sponsored health insurance after a job loss or reduction in work hours. So, if you’ve begun to freelance or take on gig work, in these circumstances and you previously held a job with health insurance, you may be eligible to retain coverage for up to 18 months, but you will need to pay the full premiums.
Unemployment Benefits
One of the main drawbacks to being a freelancer or gig worker is a lack of provision of unemployment benefits. However, there are some programs that may assist you under certain circumstances.
DUA
DUA or Disaster Unemployment Assistance is available if you’re self employed or a gig worker affected by a major disaster. DUA is only activated by the President declaring a major disaster, which activates DUA authorization. This offers weekly unemployment benefits that typically last up to 26 weeks.
However, you must be legally authorized to work, be available to work (except when you’re prevented from working by disaster,) provide proof that your self employment was lost as a result of the disaster and be unable to qualify for regular state unemployment.
State Specific Programs
Some states have implemented programs to extend unemployment benefits to the non traditional worker including gig workers and freelancers. It is well worth checking with your state labor department to see if your state is exploring or has implemented a program, and obtain details on the current eligibility rules.
PUA
During the COVID 19 Pandemic, the CARES Act introduced Pandemic Unemployment Assistance or PUA. This extended unemployment benefits to gig workers and independent contractors who would have traditionally been excluded from the government unemployment systems.
This specific program ended in 2021, but it has set a precedent for future programs.
Retirement Savings Benefits
There are a number of retirement savings benefits that are accessible to freelancers, gig workers and other self employed individuals.
Traditional/ROTH IRAs
As a freelancer, you can contribute to an Individual Retirement Account or IRA, to save for your retirement. Both traditional and ROTH IRAs are available to the self employed and offer government tax benefits. The difference between the two is that traditional IRAS allow tax deductible contributions. This means that you can take a tax deduction on the money you pay into your IRA. On the other hand, ROTH IRAs allow tax free withdrawals when you reach retirement age.
There are both pros and cons associated with each account. You will need to think about your current and future earnings with your freelance or gig worker career. If you’re currently making more money than you anticipated, the tax deduction of a traditional IRA could be beneficial. However, if you don’t currently need further tax deductions or may be in a higher income tax bracket later, a ROTH IRA would allow you to enjoy tax breaks in retirement.
Solo 401K
The Solo 401K is a specifically designed product for self employed individuals that don’t have employees. This allows you to benefit from higher contribution limits compared to an IRA. Essentially, you can make contributions both as an employer and employee of your business enterprise for a larger retirement savings fund.
SEP IRA
The Simplified Employee Pension IRA is easier to manage compared to a Solo 401K with higher contribution limits that is ideal for a freelancer with a variable income.
Tax Benefits/Deductions
While not technically a government benefit, as a freelancer or gig worker, there are some tax benefits and deductions that can help improve your financial situation. In addition to deducting your business related expenses on your tax returns, you can look for specific deductions for your role and industry.
For example, if you use a portion of your home exclusively for work, you can deduct the associated costs including utilities, maintenance and rent.
Additionally, while freelancers must pay self employment tax, it may be possible to deduct the employer equivalent portion from your taxable income. The Qualified Business Income Deduction provision in the Tax Cuts and Job Acts, also allows eligible freelancers to deduct up to 20% of qualified business income. The specific deduction percentage depends on your profession and total income.
Training and Development
The self employed can also access training and development benefits that can help you to access resources and boost your skill set. The Workforce Innovation and Opportunity Act provides access to career services and job training if you’re considered a dislocated worker. You can access these resources via your local employment center. Some states also offer grants for skill development which can help freelancers or gig workers to learn new skills or earn certifications.
Social Security/Disability
Freelancers and gig workers can contribute to Social Security through self employment taxes. This provides eligibility for retirement and survivor benefits according to lifetime earnings. If you have sufficient work credits, you may also qualify for Social Security Disability Insurance or SSDI if you become disabled.
Freelancer and Gig Worker Resources
Freelancers and gig workers can also access some business support resources via the Small Business Administration. The SBA offers disaster assistance, loans and counseling for the self-employed. This includes programs such as the Paycheck Protection Program, which was extended to freelancers in the Covid 19 pandemic in 2020.
You may also access free business advice, educational resources and financial planning via the Small Business Development Center in your local area. Many SBDCs offer free services that are tailored to independent workers.
Tips for Freelancers and Gig Workers to Access Government Benefits
While it can be a little daunting to navigate the government benefits, there are some tips that may help you to streamline the process.
- Keep Good Records: Many government benefits are income based, so it is crucial that you keep good records of your business activities. Official government paperwork will not look favorably on rough estimate figures and you may need to provide receipts, statements and other supporting paperwork. So, keep all appropriate paperwork for all your business activities.
- Check With Local and State Governments: There are numerous local, state and federal government benefits, but you can check what is available in your area by checking in with your local and state government. You may find that there are state initiatives available for freelancers and gig workers that are not available in other areas of the country.
- Seek Financial Planning Help: Freelancer and gig worker incomes can vary greatly, so it is a good idea to seek financial planning help. There are numerous free resources that can help you to navigate a challenging financial landscape, which may help you to access additional government benefits and financial aid.
Government Benefits for Freelancers and Gig Workers
Gig workers and freelancers are a growing segment of the US workforce, but traditionally, they have lacked access to the safety nets that are usually afforded to full time employees. Fortunately, the government has recognized the contribution these entrepreneurs provide to the economy and there are a variety of government benefits and programs from healthcare subsidies and retirement savings to tax deductions and skill development resources that are there to help support the independent worker.
